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Sunday, 24 July 2016

When there is deemed service of notices and award under arbitration Act?

In my view, the stand taken by the petitioners in therejoinder that the petitioner no.1 does not reside at House No.247, Acoi,Karaswada, Mapusa, Bardez, Goa – 403 507 is inconsistent and contraryto the statement made in the petition. It is thus clear that the petitionershave not come to this Court with clean hands. This Court in the case ofApex Encon Projects Pvt. Ltd. & Anr. Vs. L & T. Finance Ltd. & Anr.(supra) and in the case of Jasvinder Kaur Vs. L & T Finance Ltd. &Anr. (supra) after adverting to the provisions of Section 3(1)(b) of theArbitration Act and Section 27 of the General Clauses Act has held thatthe notices are sent by the Registered Post A.D. at the last knownaddresses of the petitioners and the same have not been returned by thepostal authority and therefore, it would amount to a deemed service ofsuch notices and proceedings. In my view, the said two judgmentssquarely apply to the facts of this case. I am respectfully bound by theaforesaid two judgments.IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONARBITRATION PETITION NO.1231 OF 2014Francisco A. D'Souza Vs.L & T Finance Ltd. CORAM : R.D. DHANUKA, J. DATE : 30th April 2015Citation:2016 (3) ALLMR803

By this petition filed under Section 34 of the Arbitrationand Conciliation Act, 1996, the petitioners have impugned the arbitralaward dated 18th September 2012 made by the learned arbitrator.2. At the threshold, Mr. Poojary, learned counsel for therespondent raises an objection of the limitation in filing presentarbitration petition impugning the arbitral award dated 18th September2012 which was lodged on 22nd April 2014. In support of thissubmission, learned counsel for the respondent invited my attention to thecompilation of documents forming part of the record before the learnedarbitrator and in particular some of the acknowledgments duly signed bythe petitioner no.1 and/or his relatives. In so far as the service of theimpugned award is concerned, my attention is invited to page 75 of thecompilation which indicates that the award was sent by the learnedarbitrator at the two addresses i.e. House No.142/B, Acoi, Karaswada,Mapusa, Bardez, Goa – 403 507 and also House No.247, Acoi,Karaswada, Mapusa, Bardez, Goa – 403 507.3. In so far as the award sent at the address of HouseNo.142/B, Acoi, Karaswada, Mapusa, Bardez, Goa – 403 507 isconcerned, the same has been acknowledged by the person who claimedto be the relative of the petitioner no.1.4. Learned counsel for the respondent invited my attention tothe cause title of the petition in which the petitioner no.1 has given boththe addresses as his addresses which were mentioned in the twoacknowledgment cards. My attention is also invited to paragraph 1.1 ofthe petition in which the petitioners have averred that the petitioner no.1has been residing at the addresses mentioned in the cause title of thepetition.5. Learned counsel for the respondent invited my attention tothe rejoinder filed by the petitioner no.2b in which it is alleged that thepetitioner no.1 does not reside at House No.247, Acoi, Karaswada,Mapusa, Bardez, Goa – 403 507 but resides at House No.142/B, Acoi,Karaswada, Mapusa, Bardez, Goa – 403 507 and his relative MaryD’Souza resides and she has taken the service of the award. Thepetitioner no.1 has himself not filed any rejoinder. Learned counsel forthe respondent accordingly submits that the copy of the award was sentby the learned arbitrator at the last known address of the petitioners.He submits that at the same address, various notices were also sent tothe petitioner no.1 by the learned arbitrator, the receipt of which thepetitioners did not dispute. The petitioners had made false and incorrectstatements in the rejoinder that the petitioner no.1 was not residing atHouse No.247, Acoi, Karaswada, Mapusa, Bardez, Goa – 403 507 whichis also ex facie inconsistent with the averments made in the petition.6. In support of his submission, the learned counsel placedreliance on the judgment of this Court in the case of Jasvinder Kaur Vs.L & T Finance Ltd. & Anr. delivered on 12th March 2015 in ArbitrationPetition No.1053 of 2012 and in particular paragraphs 15 and 18 thereofand would submit that since the award was delivered at the last knownaddresses which addresses were not disputed by the petitioner no.1 inthe petition, in view of Section 3(1)(b) of the Arbitration Act, the copyof the award is deemed to have been served upon the petitioner no.1 atthe last know addresses and cause of action for filing of the arbitrationpetition under Section 34(3) of the Arbitration Act would be commencedfrom the date of such service or in any event deemed service under theprovisions of the Arbitration Act. Paragraphs 15 and 18 of the saidjudgment read thus :-“15. Section 3 (1) (b) of the said Arbitration Act makes it clear thateven if a place of business, habitual residence or mailing address of aparty cannot be found after making a reasonable inquiry, a writtencommunication is deemed to have been received if it is sent to theaddressee’s last known place of business, habitual residence or mailingaddress by registered letter or by any other means which provides recordof the attempt to deliver it.16. A perusal of the endorsements made by the postal departmentclearly indicates that various attempts were made by the postaldepartment to deliver the copy of the award at the last known place ofresidence and business of the petitioner. In my view, thus the copy of thesaid award is deemed to have been received by the petitioner on 14thJanuary 2011. Admittedly, the arbitration proceedings having beenlodged on 30th August 2012 are thus not within the time prescribed underSection 34 (3) of the said Arbitration Act and is thus barred by limitationunder the said provision.17. Be that as it may, a perusal of the record forming part of thecompilation and also the arbitration proceedings clearly indicates thatthe learned arbitrator had sent several notices to the petitioner from timeto time at the last known address. The petitioner does not dispute theaddress mentioned in the notices issued by the learned arbitrator andshown on the acknowledgement card.18. In these circumstances, I am not inclined to accept the baresubmission of the learned counsel for the petitioner that none of the noticesor pleadings were served upon the petitioner at any point of time duringthe pendecy of the arbitration proceedings either from the respondent no.1or from the learned arbitrator. In view of Section 3(1) (b) of the saidArbitration Act, all such notices of the arbitration proceedings are deemedto have been received by the petitioner. Since the petitioner has chosennot to remain present inspite of the service of the notices of the recordand proceedings of the arbitration, the petitioner cannot be shown anyindulgence by this Court under Section 34 of the said Arbitration Act.Learned arbitrator thus is justified in making an ex parte award againstthe petitioner. In my view, the petitioner has not made out any case ofviolation of the principles of natural justice in this matter.”7. Learned counsel for the respondent also placed reliance onthe judgment of this Court passed on 16th July 2014 in the case of ApexEncon Projects Pvt. Ltd. & Anr. Vs. L & T. Finance Ltd. & Anr. inArbitration Petition (L) No.501 of 2014 and other connected matters andmore particularly paragraphs 12 to 15 in which this Court has taken asimilar view about deemed service relying upon the provisions ofSection 3(1)(b) of the Arbitration Act and Section 27 of the GeneralClauses Act. Paragraphs 12 to 15 of the said judgment read thus :-“12. With regard to the service upon petitioner No.2 in each of the abovepetitions, who are Directors of the company, one Nekkanti Rama Rao andone Padmavati Rama Rao, the packets containing award have been sent byregistered post to the place of business of the guarantors which is thecorporate address of the petitioners. Aside from Section 27 of the GeneralClauses Act which shows the deeming provision of the service, a similardeeming provision is under Section 3(1) (a) of the Act. Under section 3(1)(a) any written communication is deemed to be received if it is delivered tothe addressee inter­alia at its place of business just as in section 27 of theGeneral Clauses Act the service is deemed to be effected by properlyaddressing, prepaying and by positing by registered post, a letter containingthe document. 13. It is argued on behalf of the petitioners that delivery by post isdifferent from receipt by the party and that the service contemplates bothdelivery as also receipt. The delivery is deemed to be received under Section3(1) (a) if the aforesaid provision is complied and consequently such servicewould show the award received by the party in a manner prescribed by lawas held in the case of State of Maharashtra (Supra).14. It is argued that the learned arbitrator served the award upon theaddress of the respondent which was other than its registered address and ifthe facility was given to the respondent it should have been also given to thepetitioners. Indeed it is seen that the facility has been granted though thearbitrator is not mandatorily required to grant it unless the mailing addressis provided. There are only two addresses of the petitioners and the learnedarbitrator has served the award upon both the addresses. Having seen thatit is deemed to have been received by the corporate office and that it isactually delivered to and received by the registered office, the learnedarbitrator cannot be faulted upon the service. 15. The service is, therefore, seen to have been effected upon the boththe addresses of the first petitioners in April, 2013. The service upon thepetitioner No.2, the guarantors in each of the above petitions, is alsocorrectly made. The petitions have not been filed until 10th March, 2014.The petitions filed about year after such service are barred by the special Lawof Limitation under Section 34(3) of the Act.” 8. Per contra, learned counsel appearing for the petitionerssubmits that the petitioner no.1 was not staying at the addresses atwhich the award is alleged to have been served. She submits that thecopy of the award was received by the petitioners for the first timewhen the execution proceedings were filed by the respondent against thepetitioners. She submits that unless the copy of the award was receivedfrom the learned arbitrator, limitation to file the petition under Section34 (3) of the Arbitration Act did not commence and thus, the petition iswithin time.9. In support of her submission, the learned counsel placedreliance on the judgment of the Supreme Court in the case of Union ofIndia Vs. Tecco Trichy Engineers and Contractors, reported in AIR2005 SC 1832 and in particular paragraph 7 thereof and it is submittedthat since the copy of the award was not personally served upon therelative of the petitioner no.1, it would not amount to a proper serviceand limitation did not commence. Paragraphs 7, 10 and 11 of the saidjudgment read thus :-“7. It is well-known that the Ministry of Railways has very large areaof operation covering several Divisions, having different Divisional Headsand various departments within the Division, having their ownDepartmental Heads. The General Manager of Railways is at the very apexof the Division with a responsibility of taking strategic decisions, layingdown policies of the Organisation, giving administrative instructions andissuing guidelines in the organisation. He is from elite managerial cadrewhich runs entire Organisation of his Division with different Departments,having different Departmental Heads. The day to day management andoperations of different departments rests with different DepartmentalHeads. Departmental Head is directly connected and concerned with thedepartmental functioning and is alone expected to know the progress of thematter pending before the arbitral Tribunal concerning his department. Heis the person who knows exactly where the shoe pinches, whether thearbitral award is adverse to Department's interest. Departmental Headwould naturally be in a position to know whether the Arbitrator hascommitted a mistake in understanding Departmental's line of submissionsand the grounds available to challenge the award. He is aware of thefactual aspect of the case and also the factual and legal aspects of thequestions involved in the arbitration proceedings. It is also a known factand Court can take judicial notice of it that there are several arbitrationproceedings pending consideration concerning affairs of the Railwaysbefore arbitration. The General Manager, with executive work load of entireDivision cannot be expected to know all the niceties of the case pendingbefore the arbitral tribunal or for that matter the arbitral award itself andto take a decision as to whether the arbitral award deserves challenge,without proper assistance of the Departmental Head. General Manager,being the head of the Division, at best is only expected to take final decisionwhether the arbitral award is to be challenged or not on the basis of theadvise and the material placed before him by the person concerned witharbitration proceedings. Taking a final decision would be possible only ifthe subject matter of challenge namely, the arbitral award is known to theDepartmental Head, who is directly concerned with the subject matter aswell as arbitral proceedings. In the large organizations like Railways,"party" as referred to in Section 2(h) read with Section 34(3) of the Act hasto be construed to be a person directly connected with and involved in theproceedings and who is in control of the proceedings before the Arbitrator.The delivery of an arbitral award under sub-Section (5) of Section 31 is nota matter of mere formality. It is a matter of substance. It is only after thestage under Section 31 has passed that the stage of termination of arbitralproceedings within the meaning of Section 32 of the Act arises. The deliveryof arbitral award to the party, to be effective, has to be "received" by theparty. This delivery by the arbitral tribunal and receipt by the party of theaward sets in motion several periods of limitation such as an applicationfor correction and interpretation of an award within 30 days under Section33(1), an application for making an additional award under Section 33(4)and an application for setting aside an award under Section 34(3) and soon. As this delivery of the copy of award has the effect of conferring certainrights on the party as also bringing to an end the right to exercise thoserights on expiry of the prescribed period of limitation which would becalculated from that date, the delivery of the copy of award by the tribunaland the receipt thereof by each party constitutes an important stage in thearbitral proceedings.10. In the present case, the Chief Engineer had signed the agreementon behalf of Union of India entered into with the respondent. In the arbitralproceedings the Chief Engineer represented the Union of India and thenotices, during the proceedings of the Arbitration, were served on the ChiefEngineer. Even the arbitral award clearly mentions that the Union of Indiais represented by Deputy Chief Engineer/Gauge Conversion, Chennai. TheChief Engineer is directly concerned with the Arbitration, as the subjectmatter of Arbitration relates to the department of the Chief Engineer and hehas direct knowledge of the arbitral proceedings and the question involvedbefore the arbitrator. The General Manager of the Railways has onlyreferred the matter for arbitration as required under the contract. Hecannot be said to be aware of the question involved in the arbitration northe factual aspect in detail, on the basis of which the arbitral tribunal haddecided the issue before it unless they are all brought to his notice by theofficer dealing with that arbitration and who is in-charge of thoseproceedings. Therefore, in our opinion, service of arbitral award on theGeneral Manager by way of receipt in his inwards office cannot be taken tobe sufficient notice so as to activate the Department to take appropriatesteps in respect of and in regard to the award passed by the arbitrators toconstitute starting point of limitation for the purposes of Section 34(3) ofthe Act. The service of notice on the Chief Engineer on 19.3.2001 would bethe starting point of limitation to challenge the award in the Court.11. We cannot be oblivious of the fact of impersonal approach in theGovernment departments and organizations like Railways. In the verynature of the working of Government departments a decision is not takenunless the papers have reached the person concerned and then an approval,if required, of the competent authority or official above has been obtained.All this could not have taken place unless the Chief Engineer had receivedthe copy of the award when only the delivery of the award within themeaning of sub-Section (5) of Section 31 shall be deemed to have takenplace.”10. Learned counsel for the petitioners also placed reliance onthe judgment of this Court in the case of Mukesh Nanji Gala Vs.Heritage Enterprises, reported in 2015(2) Bom C.R. 123.11. A perusal of the record indicates that there is no dispute thatthe learned arbitrator had sent various notices at the last known addressesof the petitioners mentioned in the petition. A perusal of the affidavit inrejoinder filed by the petitioner no.2b indicates that the petitioners hadnot disputed that such notices sent by the learned arbitrator in past at thesame addresses were received by the petitioners. In the arbitrationpetition, it is also admitted by the petitioners that he has been residingat the same two addresses at which the learned arbitrator had sent noticesas well as the copy of the award. Only for the first time in the affidavitin rejoinder filed by the petitioner no.2b stated that the petitioner no.1was not residing at House No.247, Acoi, Karaswada, Mapusa, Bardez,Goa – 403 507 which is contrary to the averments made in the petition.12. In my view, the stand taken by the petitioners in therejoinder that the petitioner no.1 does not reside at House No.247, Acoi,Karaswada, Mapusa, Bardez, Goa – 403 507 is inconsistent and contraryto the statement made in the petition. It is thus clear that the petitionershave not come to this Court with clean hands. This Court in the case ofApex Encon Projects Pvt. Ltd. & Anr. Vs. L & T. Finance Ltd. & Anr.(supra) and in the case of Jasvinder Kaur Vs. L & T Finance Ltd. &Anr. (supra) after adverting to the provisions of Section 3(1)(b) of theArbitration Act and Section 27 of the General Clauses Act has held thatthe notices are sent by the Registered Post A.D. at the last knownaddresses of the petitioners and the same have not been returned by thepostal authority and therefore, it would amount to a deemed service ofsuch notices and proceedings. In my view, the said two judgmentssquarely apply to the facts of this case. I am respectfully bound by theaforesaid two judgments.13. In so far as the judgment of the Supreme Court in the caseof Union of India Vs. Tecco Trichy Engineers and Contractors (supra)relied upon by the petitioners is concerned, the Supreme Court hasconsidered the situation where the General Manager of the southernrailway, in-charge of the matter was not served with the copy of theaward at his address and thus, the Supreme Court took a view that theGeneral Manager who was the departmental head and was best person totake a final decision, whether the arbitral award shall be challenged or notand thus since he was the person directly connected with and involvedin the proceedings and who was in control of the proceedings beforethe learned arbitrator ought to have served with the copy of the awardwas not served, limitation had not commenced. In my view, the saidjudgment does not apply to the facts of this case.14. In so far as the judgment of this Court in the case ofMukesh Nanji Gala Vs. Heritage Enterprises (supra) relied upon bythe learned counsel for the petitioners is concerned, in that matter, thisCourt has considered the questions as to whether the party who was nota party to the agreement could have challenged the award under Section34 of the Arbitration Act or not. In my view, the said judgment reliedupon by the learned counsel for the petitioners does not apply to the factsof this case. Thus the reliance placed on these two judgments ismisplaced.15. In my view, the petitioners were duly served with the copyof the award by the learned arbitrator in the year 2012 itself whereasthe petitioners have lodged the petition on 22nd April 2014 which isbeyond the period of three months from the date of service of theimpugned award. The petition is thus ex facie barred by law of limitationand is accordingly dismissed. No order as to costs. R.D. DHANUKA, J.